Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Charter Oak Ins. Co. v. Maglio Fresh Food

United States District Court, E.D. Pennsylvania

October 24, 2013

Charter Oak Insurance Co., Plaintiff,
v.
Maglio Fresh Food d/b/a Maglio's Sausage Co., et al., Defendants

Page 582

For CHARTER OAK INSURANCE COMPANY, Plaintiff: FRANCIS J. DEASEY, LEAD ATTORNEY, WARD A. RIVERS, DEASEY, MAHONEY VALENTINI, NORTH, LTD, PHILADELPHIA, PA.

For MAGLIO FRESH FOOD, doing business as MAGLIO'S SAUSAGE COMPANY, Defendant: HOWARD G. SILVERMAN, HAGGERTY & SILVERMAN PC, LANCASTER, PA.

For AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Defendant, Cross Claimant, Cross Defendant: REX F. BRIEN, JR., CHRISTIE PABARUE MORTENSEN & YOUNG, PHILADELPHIA, PA; JAMES CHRISTIE, CHRISTIE PABARUE & YOUNG, PHILADELPHIA, PA.

For MAGLIO FRESH FOOD, Cross Defendant, Cross Claimant, Counter Claimant: HOWARD G. SILVERMAN, HAGGERTY & SILVERMAN PC, LANCASTER, PA.

For CHARTER OAK INSURANCE COMPANY, Counter Defendant: FRANCIS J. DEASEY, WARD A. RIVERS, LEAD ATTORNEYS, DEASEY, MAHONEY VALENTINI, NORTH, LTD, PHILADELPHIA, PA.

OPINION

Page 583

MEMORANDUM OF LAW RE MOTIONS FOR SUMMARY JUDGMENT

MICHAEL M. BAYLSON, United States District Judge.

I. Introduction

This action involves a coverage dispute between two insurers, Charter Oak Insurance

Page 584

Company (" Charter Oak" ), issuer of primary coverage, and American Guarantee and Liability Insurance Company (" American Guarantee" ), issuer of an excess and umbrella policy, and their insured, Maglio Fresh Food (" Maglio" ).

On July 12, 2012, Charter Oak filed a Complaint. ECF 1. Charter Oak amended its Complaint on August 27, 2012, and included American Guarantee as a " nominal Defendant" in its Amended Complaint, despite a lack of adverse interests between Charter Oak and American Guarantee. ECF 6. Charter Oak and American Guarantee seek a declaratory judgment that the claims against Maglio by Leonetti's, filed with the Court of Common Pleas of Philadelphia County, are not covered under these policies. ECF 40 ¶ 40. Maglio asserted counterclaims against Charter Oak, seeking coverage and making claims of bad faith, and asserted cross claims against American Guarantee also seeking coverage and alleging bad faith. ECF 10.

Charter Oak has filed a Motion for Summary Judgment, ECF 40, and American Guarantee filed a Cross Motion for Summary Judgment, both seeking a declaratory judgment of non-coverage, ECF 42. This Court will GRANT the Motions for Summary Judgment filed by Charter Oak and American Guarantee, as to the claims made against Maglio in the underlying litigation, and will enter a declaratory judgment that Charter Oak and American Guarantee have no obligation to cover the claims against Maglio.

II. Background

In its Amended Complaint, Charter Oak alleges that the Charter Oak policy does not cover the claims against Maglio because the injury suffered by the plaintiff in the underlying action does not constitute an " advertising injury" under the policy, and even if it did, express exclusions in the policy bar the claim. Id. ¶ 2.

On October 5, 2012, Maglio filed an Answer, and set forth counterclaims against Charter Oak and cross claims against American Guarantee. ECF 10. Maglio filed Amendments to its Answer on November 19, 2012. ECF 21& 22. Maglio contended that the Charter Oak policy covers the claims against it and, further, that Charter Oak could no longer contest coverage because it had previously tendered the policy limit toward settlement of all claims (ECF 10) (Ans., Counterclaim, and Cross Claim) ¶ ¶ 91, 95-100. Maglio additionally alleged that Charter Oak breached its contract with Maglio and acted in bad faith -- under the common law and Pennsylvania statutory law -- by failing to provide Maglio with independent counsel when Maglio's and Charter Oak's interests conflicted and by unreasonably failing to settle the underlying action within the policy limits. Id. ¶ ¶ 92, 104, 113-127; ECF 12. Maglio similarly alleged that American Guarantee breached its contract with Maglio and also acted in bad faith under Pennsylvania statutory law. Id. ¶ ¶ 128-144; ECF 21.

On December 5, 2012, Charter Oak filed its Answer to Maglio's Counterclaims. ECF 23. Among other contentions, Charter Oak asserted that it could not be held liable for the conduct of Maglio's counsel in the underlying trial. Id. ¶ 14. American Guarantee filed an Answer and Affirmative Defenses to Maglio's Amended Cross Claim on December 10, 2012, in which it denied that it lacked a reasonable basis for denying coverage for Maglio's claims and affirmatively asserted that its policy does not cover Maglio's claims. ECF 25 ¶ ¶ 19-22.

III. Procedural History

A. The Underlying Lawsuit

The claims against Maglio arise from a suit filed in the Court of Common Pleas of

Page 585

Philadelphia County initiated by Leonetti's, a supplier and competitor of Maglio's, which resulted in two jury verdicts against Maglio (the " underlying litigation" ). This Court sets forth an overview of those proceedings here, but also attaches a thorough chronology of the underlying litigation in light of their significance to the resolution of the present dispute. [1]

On March 8, 2010, Leonetti's initiated the litigation against Maglio based on two allegations related to Maglio's sale of frozen stromboli. ECF 41 (Def.'s Resp. to Pl.'s Mot. for Summ. J. and Cross Mot. for Summ. J.), Ex. 1. First, Leonetti's alleged that Maglio impermissibly sold an inferior stromboli product under Leonetti's brand name, Forte, after the parties terminated their private label agreement (the " Forte brand claim" ), while also denying Leonetti's ownership of the Forte. Secondly, Leonetti's claimed that Maglio sold its own brand of stromboli in boxes that reflected Leonetti's product information, not the product information of the actual manufacturer, American Kitchen Delights (the " Maglio brand claim" ). Leonetti's sought relief under theories of tortious interference, unfair competition, trade libel, breach of contract, negligent misrepresentation, and unjust enrichment. ECF 6 (Am. Compl.), Ex. 5.

Maglio tendered the claims forming the basis of the Underlying Action to Charter Oak and, on May 4, 2010, Charter Oak sent a reservation of rights letter in which it agreed to defend Maglio subject to a reservation of its rights under the policy. Id. ¶ 28 & Ex. 4.

The state court dismissed Leonetti's causes of action for negligent misrepresentation and unjust enrichment. The remaining claims for unfair competition, trade libel, and tortious interference proceeded to trial. Id. 6 ¶ 3. After nine days of trial, the trial court declared a mistrial as to the Forte brand claim due to a hung jury. Id. ¶ 34; ECF 10 (Ans., Counterclaim, and Cross Claim) ¶ 34. The Maglio brand allegations proceeded to verdict before the same jury under just one cause of action: unfair competition. On October 3, 2011, the jury returned a general verdict against Maglio and awarded compensatory damages of $2,000,000 and punitive damages of $555,000. Id., Ex. 15.

In December 2011, Leonetti's retried the Forte brand claim on a single count of unfair competition. During the second trial, Maglio requested that Charter Oak make available its $1 million policy limit for settlement purposes. Id. ¶ 44, Ex. 18. On December 22, 2011 Charter Oak did make available those funds, although Maglio's settlement efforts did not succeed at that time. Id. ¶ 45, Ex. 19. On the same day, the jury returned a general verdict against Maglio and awarded Leonetti's $660,000 of compensatory damages on the Forte brand claim. Id., Ex. 20.

Leonetti's and Maglio ultimately entered a settlement agreement on May 8, 2012 for $4.5 million pursuant to which Maglio assigned its rights under the Charter Oak policy and the American Guarantee policy to Leonetti's. Id., Ex. 27; ECF 10 (Ans., Counterclaim, and Cross Claim), Ex. 4. Charter Oak was not involved in the settlement negotiations.

On May 10, 2012 Maglio filed a Motion to Approve the Entry of a Consent Judgment and Leonetti's filed a Notice of Non-Opposition to Maglio's motion. ECF 6, Exs. 31-32. On May 18, 2012, Charter Oak filed an Emergency Petition to Intervene, requesting leave to file an opposition to Maglio's motion. ECF 6 (Am. Compl.),

Page 586

Ex. 33. The court granted Charter Oak's petition and denied Maglio's motion following a July 24, 2012 hearing. Id., Ex. 34. The Court is unaware of any further proceedings in the underlying litigation.

B. Charter Oak's Interpleader

On January 26, 2012, prior to this federal suit, Charter Oak filed a separate equitable interpleader action with the Court of Common Pleas of Philadelphia County. Id., Ex. 24. On February 7, 2012, Charter Oak filed a motion to deposit the policy limit plus post-judgment interest with the court in order to halt the accrual of post-judgment interest and demonstrate a good faith effort to settle with Leonetti's. The court granted Charter Oak's motion on March 5. Id., Ex. 25. On May 9, 2012, Maglio filed a Motion for Release of Funds and Leonetti's filed a Notice of Non-Opposition to Maglio's motion. Id., Exs. 35-36. Charter Oak initially opposed Maglio's motion but withdrew its opposition on June 28, 2012. Id. ¶ 58. On July 9, 2013, the court issued an order directing Charter Oak to distribute the full amount of the deposit to Leonetti's. ECF 40 (Pl.'s Mot. for Summ. J.) ¶ 36. The funds were released to Leonetti's on July 16, 2012. ECF 10 (Ans., Counterclaim, and Cross Claim) ¶ 58.

C. This Federal Lawsuit

On July 12, 2012, before the funds were released by the court in the Equitable Interpleader Action, Charter Oak initiated the present litigation, seeking a declaratory judgment of noncoverage. On October 5, 2012, Maglio filed an Answer, and set forth counterclaims against Charter Oak and cross claims against American Guarantee. ECF 10. Maglio alleged that both policies covered the claims against it and that both insurance companies breached their contracts with Maglio and acted in bad faith. Id. American Guarantee filed an Answer and Affirmative Defenses to Maglio's Amended Answer on December 10, 2012, asserting that its policy does not cover Maglio's claims. ECF 25 ¶ ¶ 19-22.

This Court issued a Scheduling Order on January 23, 2013, noting that counsel agreed to decide coverage issues first, but disagreed as to the scope of the coverage issues and the discovery related to those issues. ECF 28. The parties then submitted briefs on the scope of discovery. ECF 29-34. On March 14, 2013, this Court ordered that the parties should take no additional discovery at that time because the extensive record of the underlying action would suffice to determine the coverage issues. ECF 36.

On May 6, 2013, Charter Oak filed a Motion for Summary Judgment seeking a declaratory judgment of no coverage. ECF 40. On May 22, Maglio filed a Motion for Summary Judgment seeking a declaratory judgment that the policies cover the claims. ECF 40. On June 21, 2013, American Guarantee filed a Cross Motion for Summary Judgment. ECF 42. This Court held oral argument on the summary judgment motions on September 25, 2013.

IV. The Policies

A. The Charter Oak Policy


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.